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The Bank of Canada's balance sheet shrank this week by the most since the pandemic began as term repos used to control last year's market squeeze unwound, setting the stage for a reset of quantitative easing to focus on boosting the economic rebound.
Assets dropped to CAD525 billion as of April 7 from CAD552 billion a week earlier, and are down from CAD569 billion two weeks ago. The value of term repos fell to CAD86 billion from CAD114 billion, the first time in a year they have been below CAD100 billion.
Deputy Governor Toni Gravelle has said the balance sheet will shrink by CAD100 billion in the next few weeks as repos lapse. He also suggested the BOC could then adjust QE to focus on economic stimulus by holding the size of the balance sheet constant and reinvesting proceeds of maturing assets.
The BOC has pledged to buy at least CAD4 billion a week of government bonds until the economic rebound is well underway, though some investors have told MNI they predict a tapering to CAD3 billion a week at the April 21 policy meeting.